Today I am looking at three FTSE giants carrying monumental yields.
A hulking healthcare star
I am convinced that pharmaceuticals giant AstraZeneca (LSE: AZN) should deliver increasingly-appetising returns in the coming years as its bubbly product pipeline delivers the goods.
The London company continues to suffer from colossal patent losses on massive labels like its Crestor cholesterol battler, and the City expects further woes to keep the bottom line under pressure. Indeed, AstraZeneca is expected to follow a 5% earnings decline in 2015 — a fourth successive decline if realised — with an extra 6% dip in the current period.
But AstraZeneca’s renewed R&D drive is increasingly providing plump returns, and the business has received a stream of positive regulatory news for its Lesinurad, Brilique and Tagrissot products in the past month alone. It has also kept its busy acquisition drive rolling during the period with the purchase of cardiovascular specialists ZS Pharma, as well as the respiratory divisions of Takeda.
With its earnings prospects clearly on the up, the number crunchers are confident that AstraZeneca can maintain a dividend around 280 US cents through the close of next year, resulting in a chunky 4.2% yield. And with healthcare spending taking off across the globe, I expect the business to produce increasingly-tantalising returns further down the line.
Funds continue to flow
Financial play Jupiter Fund Management (LSE: JUP) greeted the market with a positive trading update during Thursday business, although the good news has been washed out by the wider malaise shaking global stock markets.
Jupiter saw assets under management as of the end of December clock in at £35.7bn, up from £33.5bn just three months earlier. While emerging market play Ashmore Group reported crushing results today thanks to slumping developing regions, Jupiter’s strategy of diversifying across multiple geographies, client types and products is enabling fund inflows to keep on trucking.
With the City anticipating further steady earnings growth in the medium term at least, Jupiter is expected to raise an anticipated dividend of 23.8p per share for 2015 to 25.1p in the current year. As such Jupiter carries a brilliant yield of 5.4% for 2016.
While investors should be mindful of souring market appetite on Jupiter’s performance looking ahead, I believe the fund manager’s shrewd approach could maintain its position as a strong long-term income play for some time to come.
Stuck in a hole
I am much less optimistic concerning the outlook over at diversified mining giant Rio Tinto (LSE: RIO), however, with each downleg in commodity prices casting a fresh pall over the company’s dividend prospects.
Iron ore prices, a critical segment for Rio Tinto’s earnings performance, continue to head through the floor, and Citi today slashed its price forecasts to $35 per tonne for 2016 and $35 for 2017 and 2018. The steelmaking ingredient is gradually edging back to the six-and-a-half nadirs struck in December, at $38.30 per tonne.
Still, analyst consensus suggests currently suggests a dividend of 215 US cents per share for 2015, matching the previous year’s payment, before Rio Tinto hikes the dividend to 219 cents this year. While this year’s projection creates a barnstorming 7.3% yield, I simply cannot see such dividends materialising while the firm’s earnings collapse and debt levels explode.